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Responsibility Accounting MC Questions Solution

Provided by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Responsibility Acct Main Page | Responsibility Acct Discussion Questions | Grad MA Course

1. Which of the following can be delegated?

b. authority.

2. Which of the following types of organizations provide the best indicator of decentralization?

d. A company is organized into investment centers.

3. Economic value added, or residual income is a measurement mainly used to evaluate

d. investment centers.

4. Which concept (or concepts) listed below is (are) consistent with traditional responsibility accounting?

a. vertical structure.

5. In relation to the responsibility accounting controversy, goal displacement means

b. assigning responsibility for financial results rather than activities and processes.

6. According to C. J. McNair, reward systems should change to emphasize

d. base pay plus bonuses based on team performance.

7. C. J. McNair’s concept of activity based responsibility accounting emphasizes

c. interdependence, processes, the organization, and activities.

8. Decomposing, or separating, ROI into two parts provides the

d. sales to investment ratio and net income to sales ratio.

9. Which investment basis (or bases) for the ROI calculation tend (or tends) to cause managers to dispose of assets too soon?

a. gross book value.

10. Which investment basis (or bases) for the ROI calculation tend (or tends) to cause managers to keep assets too long?

b. net book value.

11. Residual income is

e. income after subtracting a minimum desired amount of income.

12. Which measurement (or measurements) below would tend to favor large divisions over small divisions if the divisions were ranked?

e. b and c.

13. The main argument for the use of residual income (RI) as a measure of performance for investment centers, as opposed to the ROI, is that

a. RI will not cause managers to reject investment alternatives that generate a return greater than the cost of capital, but lower than the divisions average ROI.

14. An underlying concept of budgeting and standard cost systems is

d. the concept of responsibility accounting.

15. Standard cost variances are frequently used to evaluate cost centers. Which of these variances are compatible with lean enterprise concepts?

e. None of the above.

16. When using a standard cost system, which of the following is not a potential behavioral problem associated with using material price variances as a single basis for evaluating the purchasing department?

c. Using less quantity than needed in the production process.

17. From the statistical control perspective, what is the greatest deficiency associated with the standard cost control methodology?

a. Standard cost control does not include the statistical concept of variability.

18. Which type of responsibility center has the greatest amount of autonomy?

d. an investment center.

19. Which of the following represent arguments against traditional responsibility accounting?

e. All of the above.

20. Which of the following characteristics is not associated with traditional responsibility accounting?

d. Attempts to control processes.

21. The characteristics of traditional responsibility accounting include

a. a vertical organizational structure.

22. The characteristics of a responsibility system for a JIT, or lean organization include

c. cross functional measurements.

23. Control systems in traditional responsibility accounting are

b. based on the top down concept.

24. Goal displacement refers to a situation where

c. costs are emphasized rather than activities.

25. Which of the following support the traditional responsibility concept?

e. none of the above.

26. The controllability concept refers to

b. measurements within the control of individuals.

27. In his article "The third wave breaks on the shores of accounting", Robert Elliott advocated which type of organizational structure?

c. network.

28. C. J. McNair has argued that emphasis should be placed on which of the following?

e. all of the above.

Responsibility Accounting MC Questions